Financial Analysis

John Lopez-Ona, president and CEO of Six Sigma Qualtec, offers his perspective on Six Sigma and return on investment  from how to measure ROI in a Six Sigma initiative to the critical success factors in achieving a satisfactory ROI.

The Cost of Poor Quality (COPQ) is the initial financial analysis conducted for a Six Sigma project. The challenge comes when no measurements are available at initiation of a project. Here is an approach for meeting that challenge.

The cost of good quality must be factored into the overall cost of quality. Following the Six Sigma philosophy of building quality into process, service and products, however, can lower the cost of good quality and therefore overall cost.

In addition to the more familiar Green Belts and Black Belts, some Six Sigma organizations have defined another role called a Money Belt. The goal is to provide an independent and objective evaluation of the financial benefits of Six Sigma projects.

Organizations using Six Sigma measure success in terms of hard savings, and are less impressed with soft savings. But it pays to consider both when evaluating a Six Sigma project. Sometimes soft savings are harder than management realizes.

Most companies using Six Sigma are used to including financial staff at the back-end of projects to validate results. But the savviest organizations are getting their finance departments involved in what projects to work on in the first place.

How confident can a company be that claims of Six Sigma benefits actually impacted the bottom line? BHP Billiton Base Metals found an answer through the involvement of the finance department in its deployment of Six Sigma.

Threshold investigations should be an integral part of any continuous improvement program. By optimizing thresholds, Belts can yield incredibly significant and immediate results because thresholds directly affect scrap and lost sales.

During the past four years the Internet channel has seen the migration from an exploratory revolution of new functionality to creating a viable profitable business. It is no longer feasible to place additional technological enhancements on the web without considering…